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Debt Cancellation & Student Loan Pause Extended
August 25, 2022
At A Glance
On Wednesday, August 24, 2022, the White House announced:
- Cancellation of debt up to $10,000 in federal student loans for individuals making less than $125,000 per year
- Cancellation of debt for Pell Grant recipients up to $20,000 for married couples or heads of household making less than $250,000 per year
- Student Loan pause extended from August 31 to December 31, 2022
Debt Cancellation
The White House in conjunction with the U.S. Department of Education announced a cancellation of student debt for certain qualifying borrowers. Qualified borrowers are individuals making less than $125,000 per year or are married couples or heads of household making less than $250,000 per year.
Per the U.S. Department of Education, Non-Pell Grant recipients meeting the income threshold will qualify for debt forgiveness up to $10,000. Pell Grant recipients meeting the income threshold will qualify for debt forgiveness up to $20,000. Student loan forgiveness is capped by the federal government at the amount of outstanding debt.
Private loan holders do not qualify for this plan.
Student Loan Pause Extended
The White House will extend the pause on student loan repayment, interest, and collections, “one final time” through December 31, 2022. The student loan pause was set to expire on August 31.
Student Loan System Reform Proposed
The White House announced other efforts to reform the student loan system. According to the U.S. Department of Education, the federal government proposed a rule to limit income-based repayment plans to 5% of discretionary income instead of 10%. In addition, the proposal would forgive loan balances after 10 years instead of 20 years for borrowers with loan balances of $12,000 or less, among other initiatives.
Next Steps
In the coming weeks, the U.S. Department of Education will present in detail a short and simple form with instructions on how to apply for those who qualify for debt forgiveness. This will include information regarding when the application process opens.
Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.
